I run a small private investment partnership, which invests globally with a macro theme. I would say the study of economics is best done in the tradition of the gentleman economists of the past, such as David Ricardo, Adam Smith and John Stuart Mill. Previously, I was an economist and macro strategist for a firm that served institutional investors. My book Gold: the Once and Future Money was released in 2007, and is now available in German, Chinese, Korean and Russian. My opinion pieces have appeared in the Financial Times, Asian Wall Street Journal, Dow Jones Newswires, Worth, Daily Yomiuri, Asia Times, Pravda, Huffington Post, and numerous other print and online publications. I also have a personal website at newworldeconomics.com.

Central Bankers Don't Know What They're Doing: They're Faking It

One of the hardest things for many people to comprehend is that the people in charge of currency management around the world – central bankers, the IMF and so forth – don’t actually know what they are doing. They’re faking it.

How do we know this? Because as soon as they are called upon to do something specific, they fail miserably.

A gold standard is a type of value peg. It is not really any different than pegging one currency to another, or to a currency basket. It’s just a different target.

Obviously, if you are going to have a policy of maintaining a currency at a specific value – whether it be 35 units per ounce of gold, or ten units per U.S. dollar, or anything else – then you need some technique to make this happen.

One of the reasons that central bankers are loathe to adopt any kind of value-peg type policy is that as soon as they are called upon to do so, they fail miserably. The peg blows up in their face. This is embarrassing. Someone might figure out that they’re faking it.

Of course they immediately blame “the market” or “speculators” or some other external factor, not their own incompetence. It’s nice to be a central banker. You get to make speeches at Davos. Otherwise, they might have to get a degree in accounting.

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